Changing partners
Manufacturers want help in bending information technology to the will of the business
By Roberto Michel, senior contributing editor -- Manufacturing Business Technology, 1/1/2006 12:00:00 AM
As manufacturing executives evolve into more sophisticated IT consumers, they no longer just want to buy hardware and software. They are looking for strategic IT partners.
"If you're a technology buyer today, you are likely anchoring your investment around one or two large vendors—maybe three at the most," says Bob Parker, a VP with Framingham, Mass.-based analyst firm Manufacturing Insights, an IDC company.
Parker concedes there is an element of risk involved in awarding the lion's share of business to a small group of suppliers. He also notes that given the complex nature of technology today, "If you get beyond three strategic partners, it becomes overwhelming to administer the solutions."
That line of reasoning led Advance, a Rosemont, Ill.-based manufacturer of ballasts for the lighting industry, to designate Hewlett-Packard (HP) as its primary IT partner. Advance relies on HP for systems-management software to keep its operations running smoothly, but also for much more—including the server platform for its ERP system, for disaster-recovery training and other IT services, as well as for some higher-level consulting.
"If you look at [an IT vendor] as just a hardware supplier, you are missing the essence of what they can do," says Julius Tomei, CIO at Advance. "For example, we brought HP management in to talk about supply chain strategy."
As the IT industry consolidates, fewer big players remain. Those that do, like HP, have branched out from server hardware and operating system platforms to offer a wider range of software and services.
Middleware for what's known as a service-oriented architecture (SOA) also has become part of the tool kit for big IT vendors. Fundamentally, an SOA is a technology infrastructure in which software applications are broken into modular components—called services—and placed in a repository where they can be easily accessed either by users or other services. When this is done properly, a company can implement new business processes almost at will by writing procedures that call for specific sets of services to interact with one another.
That ability to bend technology to the will of the business is what manufacturers are coming to expect from their strategic IT partners. As Tomei says, "What they bring to the table is a comprehensive infrastructure of hardware, software, and people resources that allows building an environment that is highly adaptable and available to the business."
Servicing the business
A guiding principle in Advance's IT investments, according to Tomei, is managing "service delivery." This means ensuring that the company's systems consistently deliver the needed functionality to business users.
"We need to be able to measure the service we provide, monitor it, and know we are delivering the right amount of service at the right price," says Tomei. "All of these goals are done through the adaptive architecture HP provides, which has a hardware layer, a software layer, and a services component."
Advance uses HP's OpenView systems management solution to address service delivery. On the hardware side, Advance uses UNIX-based servers from HP to run its SAP ERP system. It also relies on HP for its storage area network (SAN) hardware.
Systems and network management solutions can monitor all manner of computing devices and network traffic, including file and print servers, network switches and routers, ERP, or even telephony systems. Tomei says Advance uses OpenView to monitor a range of systems at 19 sites, 15 of which run SAP.
Advance uses OpenView Service Desk to quickly react to trouble spots, and constantly monitor traffic to stay within the level of service the business expects. Service Desk is configured, for instance, to spot slowdowns in ERP transaction processing that could impact a function such as order fulfillment in a warehouse. "At the end of the day, the objective is to ensure nothing happens that could negatively impact the business," Tomei says.
OpenView has helped Advance drastically cut resolution time for many IT problems. "Today, with pinpoint precision, we can see what is causing the problem, learn who is responsible, and get a fix typically within minutes," Tomei says. "[OpenView] is a comprehensive set of tools that changes the way you support your business."
This level of data-center automation has allowed Advance to grow its business while keeping its IT staff relatively small. While HP and other IT vendors have grown in part by delivering IT operations outsourcing services, in Advance's case, the IT services provided are more limited. They include disaster-recovery training, assistance with quarterly reviews of critical systems support, as well as tools and IT Infrastructure Library (ITIL) training. ITIL is a set of best practices for IT operations management that includes incident, change, and update management procedures.
A complementary role
"In the data center, it's our people running the operation, but HP complements what we do," says Tomei. "And when I look at the transformation that's taken place, we've gone from a more reactive mode to a proactive mode of support. That allows us to deliver a high degree of service at the best price to our business."
Advance used consulting firm BearingPoint with its SAP implementation, but also tapped a team of HP supply chain experts to discuss some of the best practices HP uses in its own supply chain. Advance's senior executives, procurement managers, and IT leadership were part of the HP consultation.
"As a global supplier itself, HP has strong supply chain managers," Tomei says. "They helped us understand how another business approaches the supply chain."
Ulrich "Uli" van der Meer, VP and general manager for Worldwide Manufacturing & Distribution Industries in HP's Technology Solutions Group, agrees users want major IT vendors to function as strategic partners.
"Particularly in manufacturing and distribution, our customers expect we will share with them the best practices that can be of value," says van der Meer.
Key areas in which HP has direct expertise, van der Meer adds, include deployment and use of supplier-facing portals, RFID, and procurement risk management, which involves a framework for analyzing tradeoffs in availability, costs, and demand-fulfillment when procuring components. "We have firsthand experience we are willing to share," says van der Meer. "Up until a few years ago, we were fairly conservative in terms of sharing those best practices."
Expert input
Of course, IBM—the world's largest IT vendor—attained much of its success by diversifying beyond computer hardware. Under former CEO Louis Gerstner during the 1990s, IBM grew its consulting business and expanded its software portfolio. Today, IBM continues to push boundaries with its services, tapping into expertise from its core research & development.
Christine Lemyze, VP of marketing for IBM's Global Industrial Sector, says IBM's services are geared toward improving or "transforming" a client's performance. IBM has dubbed this Business Performance Transformation Services, or BPTS. "The BPTS program is driven by the need to optimize enterprise performance," Lemyze says. "In the manufacturing sector, the four areas we are particularly focused on with BPTS are supply chain management, engineering, finance and accounting, and human resources."
While a BPTS engagement could involve outsourcing certain functions to IBM, the ultimate goal is improving processes. Lemyze says rapid innovation is a goal for most manufacturers today. To respond to this need, IBM formed a group called Engineering & Technology Services in late 2002. This group taps into IBM's engineering know-how to gain support for its clients. For example, IBM used its expertise in notebook computing to help Minneapolis-based Medtronic develop a portable computer platform to program and communicate with its line of medical devices.
In the engagement, IBM employed a ThinkPad notebook reference motherboard design along with an IBM custom-designed pen and touch-screen system, a medical-grade power supply, a 15-inch LCD display, and a thermal-chart recorder in a custom magnesium enclosure. "This project was focused on Medtronic's needs, leveraging some of its medical-device technology, but based on the assets that we have to help the company innovate quickly," says Lemyze.
Another IBM strength, Lemyze says, is its WebSphere family of middleware and other infrastructure software that supports an SOA. In fact, she adds, "To make any of these solutions aimed at transforming your processes work properly, you need that middleware layer."
And SOA it goes
The evolution toward SOA is blurring the lines in terms of what the big IT vendors offer. For example, a vendor such as Oracle Corp. is a powerhouse in both databases and enterprise software, but also has built out its middleware offerings as computing evolves toward SOA. SAP, traditionally an enterprise software vendor, entered the middleware arena via its NetWeaver platform for integration, and what it calls Enterprise Services Architecture—its own spin on an SOA.
Manufacturing Insights' Parker says having either software for SOAs or consulting expertise in SOA projects has become "table stakes" for IT vendors seeking business in the manufacturing sector. "A strong SOA story doesn't guarantee success for the big vendors, but it's become a more important part of what they do," claims Parker.
Microsoft supports the SOA concept through its .NET framework and XML Web services, says John McGlynn, managing director of Microsoft's U.S. Manufacturing Industry Unit. While McGlynn concedes there is some "hype" around SOAs, the concept makes sense because "fundamentally, it's about enabling business agility and closing the gap between business need and the speed at which IT departments can deliver solutions."
Though not among the biggest IT vendors, Progress Software also has evolved to support SOAs. Traditionally, Progress was known for its database, which remains a viable option for manufacturing-oriented ERP vendors such as QAD, Epicor, and Symix, now part of Infor Global Solutions.
In recent years, says Neil Powers, VP of products for Progress's OpenEdge Division, the database business has extended to encompass a broader technology infrastructure offering capabilities such as an application server and an integration bus. "If you look at the whole stack we offer, it's everything that would fit into a modern applications infrastructure," Powers says.
To compete with bigger vendors, Powers says Progress has a couple of things going for it. For one, it's not trying to sell business applications, so there is no threat of lock-in, yet the vendor still has strong application partners in manufacturing. Second, the applications infrastructure Progress offers carries on the heritage of the Progress database. "It's an easier application infrastructure environment to put in, to manage, and to grow with," Powers says.
To win as strategic partners, there is consensus that the big IT vendors must do more than stick to traditional products and services—or even support SOAs. According to Parker, the major IT vendors are all progressing with SOAs, but tend to be pushing the wrong message.
Too many of the big vendors are positioning SOAs as a way to flexibly coordinate business processes, which Parker believes is an unconvincing pitch to top executives who were sold ERP a decade ago on the promise it would deliver integrated business processes. As Parker puts it, "Where the message needs to go with SOAs is not this process-orchestration story—because users already are supposed to have that—but more about intelligent decision models. In other words, how does SOA help me organize my data, get it to decision makers faster, and create corrective-action capability?"
All those things improve business performance, which is what strategic partners are supposed to help you do.
U.S. manufacturing industry IT revenue for the top 10 vendors, 2003
| Rank | Vendor | Revenue ($M) |
| Note: For the top 10 vendors, IDC has not included revenue from the biotech and pharmaceutical segments of process manufacturing. Source: IDC |
||
| 1 | IBM | 8,005 |
| 2 | Hewlett-Packard | 7,202 |
| 3 | Microsoft | 4,186 |
| 4 | Dell | 2,754 |
| 5 | EDS | 2,255 |
| 6 | Oracle | 1,850 |
| 7 | Cisco | 1,829 |
| 8 | CSC | 1,168 |
| 9 | Accenture | 1,084 |
| 10 | Sun Microsystems | 961 |
| Total top 10 vendors | 31,294 | |
